Optimal Tax Theory is an economic framework that seeks to design tax systems that maximize social welfare while minimizing economic distortions. It aims to balance the need for government revenue with the goal of promoting efficiency and equity in the economy. By analyzing how different tax structures affect individual behavior and overall economic activity, policymakers can create tax systems that encourage growth and fairness. The theory often considers factors such as income distribution, public goods, and incentives for work and investment. It suggests that taxes should be structured to minimize negative impacts on productivity while ensuring that the burden is fairly shared among citizens.